2026 One Big Beautiful Bill Tax Changes and Planning Guide

Public Law 119-21, signed July 4, 2025, prevented many scheduled Tax Cuts and Jobs Act expirations and added temporary deductions and business provisions with different effective dates. The useful planning question is no longer whether the TCJA will sunset at the end of 2025; it is which current rule applies, when it applies, and what records the taxpayer must retain.

Permanent Individual Rules and 2026 Amounts

The seven-rate individual structure and larger standard deduction continue. For 2026, the standard deduction is $16,100 for single filers and married filing separately, $32,200 for married filing jointly, and $24,150 for heads of household. Personal exemptions remain zero.

Roth-conversion planning therefore should use projected current and future brackets, RMDs, Medicare IRMAA, state taxes, cash available for the tax, and the taxpayer's estate plan. The old assumption of an automatic 2026 rate increase is no longer valid.

Temporary Schedule 1-A Deductions: 2025 Through 2028

Qualified Tips

Eligible taxpayers may deduct up to $25,000 of qualified tips in occupations the IRS identifies as customarily and regularly receiving tips. The deduction phases out when modified AGI exceeds $150,000, or $300,000 for joint filers. Tip income remains subject to applicable payroll taxes, and employer and worker reporting still matters.

Qualified Overtime Compensation

The deduction is limited to the overtime premium required by the Fair Labor Standards Act — generally the additional one-half portion, not all pay earned during overtime hours. The annual cap is $12,500, or $25,000 for joint filers, with phaseouts beginning at modified AGI of $150,000 and $300,000, respectively.

Qualified Passenger-Vehicle Loan Interest

Individuals may deduct up to $10,000 of eligible interest on debt incurred after 2024 to purchase a qualifying new personal-use vehicle whose final assembly occurs in the United States. The debt must be secured by the vehicle. The deduction phases out above modified AGI of $100,000, or $200,000 for joint filers. A lease, business-use vehicle, used-vehicle purchase, or unsecured personal loan does not automatically fit these rules.

Enhanced Senior Deduction

An eligible taxpayer age 65 or older may claim up to $6,000 in addition to the existing age-based standard-deduction amount. A qualifying joint return may claim up to $12,000 when both spouses qualify. The deduction phases out above modified AGI of $75,000 for single filers and $150,000 for joint filers; married taxpayers must file jointly to claim it.

SALT Cap: Higher, but Temporary

The federal itemized deduction limit for state and local taxes is $40,400 in 2026 ($20,200 for married filing separately). The 2026 phase-down begins above modified AGI of $505,000 ($252,500 for married filing separately), subject to statutory floors. The higher cap is temporary and is scheduled to return to $10,000 ($5,000 married filing separately) in 2030. Pass-through entity tax elections remain state-specific and must be modeled with owner credits, entity deductions, election deadlines, and state conformity.

Section 199A QBI Is Permanent

The deduction of up to 20% of qualified business income continues after 2025. In 2026, the limitation phase-in ranges are $403,500 to $553,500 for married filing jointly, $201,775 to $276,775 for married filing separately, and $201,750 to $276,750 for all other returns. SSTB classification, W-2 wages, UBIA, aggregation, reasonable compensation, and loss carryforwards still require separate analysis. See the current Section 199A planning guide for the detailed mechanics.

100% Bonus Depreciation and Section 179

Permanent 100% additional first-year depreciation generally applies to eligible property acquired after January 19, 2025, subject to binding-contract, acquisition, and placed-in-service rules. It did not retroactively turn all 2023 and 2024 property into 100% bonus property. For 2026, Section 179 allows up to $2,560,000 of eligible expensing, with the phaseout beginning at $4,090,000 of qualifying property placed in service. Business-purpose, taxable-income, vehicle, related-party, and state-conformity limits still apply.

Domestic Research Costs Under Section 174A

Domestic research or experimental expenditures paid or incurred in tax years beginning after 2024 may generally be deducted currently under Section 174A. Foreign research remains subject to 15-year capitalization. Transition relief for previously capitalized domestic costs differs for eligible small businesses and other taxpayers; amended-return, election, and accounting-method procedures should be confirmed before assuming a refund is available.

Estate and Gift Planning

The federal basic exclusion amount is $15 million per individual in 2026. That reduces the former federal sunset pressure, but it does not eliminate planning for estates near the threshold, future appreciation, portability, basis, state estate or inheritance taxes, asset protection, beneficiary designations, and administration. Completed transfers should follow a documented legal and valuation plan, not an obsolete 2025 deadline memo.

Charitable Planning Changed in 2026

Beginning in 2026, taxpayers who itemize generally deduct charitable contributions only to the extent contributions exceed 0.5% of contribution-base AGI. Eligible nonitemizers may deduct up to $1,000 of qualifying cash gifts, or $2,000 on a joint return; donor-advised-fund contributions are excluded from that nonitemizer deduction. Bunching, appreciated-property gifts, and QCDs should be re-modeled under those current rules.

Implementation Checklist

• Separate permanent provisions from temporary 2025–2028 deductions and the temporary 2025–2029 SALT increase.

• Reconcile Schedule 1-A deductions to payroll, lender, vehicle, age, filing-status, and modified-AGI records.

• Confirm acquisition and placed-in-service dates for bonus depreciation and Section 179.

• Reconcile domestic and foreign research ledgers before selecting a Section 174A transition method.

• Update QBI, estate, Roth-conversion, charitable, and state-conformity projections using 2026 amounts.

Bottom Line

The OBBB replaced a single 2025 sunset story with a mix of permanent provisions, temporary deductions, transition elections, and accelerated deadlines. Reliable planning starts with the exact tax year, effective date, filing status, income phaseout, and supporting records. Re-run old TCJA projections under current law before acting on them.